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FHA Loan Limit Reduction

Reduction to FHA Loan Limits

On December 6th, 2013, the Federal Housing Authority (FHA) announced a reduction to the maximum loan limits for all case numbers assigned after January 1st, 2014. The current limit for a one-family structure in Clark county is $400,000 and will be reduced to $287,500.

FHA commissioner, Carol Galante, stated it was time to “evaluate the role we need to play. Implementing lower loan limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still under served.”

FHA's flexible guidelines and low down payment requirement make it a great solution for home buyers. Historically, FHA's guarantee was aimed at median priced housing, but in 2008 the agency increased limits as a result of the Economic Stimulus Act. This decision provided financing aid to a struggling economy, including a whole section of troubled homeowners. As the economy recovers, FHA has decided to return to their original focus by reducing loan limits.

Some believe that the decision will have an isolated impact affecting as little as 1% of purchase transactions. However, if you are currently under contract or on the verge, have applied for an FHA mortgage, and your loan is greater than $287,500 then you need to visit with your loan originator regarding the status of your case number. It must be assigned prior to January 1st to avoid jeopardizing your loan approval.

Here are a few definitions to help you understand some of the terminology used in this article:

• What is a loan limit?
A loan limit is the maximum amount FHA will insure, therefore, the most you can borrow and still be eligible for an FHA loan.
• How are loan limits calculated?
Loan limit calculations revolve around the medium home price in your county which means each area will have a slightly different limit.
• What is a case number?
A case number is a number attached to the property when you apply for an FHA loan. It is the lenders responsibility to register the case with FHA, a task often completed shortly after receipt of your signed application and disclosures.

You can find the original statement on the HUD website at the following address:

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